Sweden told people to open their hearts to immigrants 10 years ago. Its U-turn has been dramatic

Sweden is often viewed as a a liberal utopia in Europe and beyond, with the country of 10.5 million people known for its stable economy, high quality of life and open and progressive society.

That reputation for acceptance and tolerance was manifest in 2014 when asylum seekers started to arrive en masse in Sweden and elsewhere in Europe from war-torn areas of the Middle East, particularly Syria.

At the time, Sweden's then-Prime Minister Fredrik Reinfeldt implored citizens to "show tolerance," telling the public: "I know that this will cause friction. I therefore call on the Swedish people to show patience and open their hearts."

Sweden registered 81,301 asylum seekers in 2014, data shows. By 2015, that number had doubled to almost 163,000 and in November that year, Sweden said it needed "respite."

"It pains me that Sweden is no longer capable of receiving asylum seekers at the high level we do today. We simply cannot do anymore," Prime Minister Stefan Löfven said at a now-infamous press conference which saw the deputy prime minister break down in tears.

Since then, Sweden's immigration policy has been on a one-way street. It became tighter under the center-left coalition government in power until late 2022, and even more strict under the current conservative administration led by the center-right Moderate Party but propped up by the far-right Sweden Democrats.

Under the aegis of the nationalist party, Sweden's government has adopted an increasingly restrictive and — critics say — hostile stance when it comes to immigration, reversing years of liberal policy in the area.

It says it is implementing a "paradigm shift" in its migration policies as it targets "sustainable immigration."

As it stands, around 2.1 million of Sweden's inhabitants, or 20% of the population, were born abroad, with Syria, Iraq, Iran, Somalia and Afghanistan the most common non-EU countries of birth.

The current center-right government has announced a raft of initiatives and policies designed to reduce what's known as irregular — or undocumented — immigration. These include far stricter asylum legislation and tougher rules on family members joining immigrants already in Sweden. In addition, the government has proposed new initiatives to deport or repatriate migrants (including using financial incentives) and to increase its powers to revoke residence permits.

The government also wants to greatly reduce the number of low-skilled laborers moving to Sweden. It's introducing a new immigration law that only gives work permits to immigrants who earn a monthly salary of at least 80% of the median Swedish salary, which currently stands at 35,600 Swedish Krona (approximately $3,455). The government noted that certain professions, such as domestic care workers, should be excluded from the new requirements, however.

Jacob Lind, a researcher in international migration at Malmö University in Sweden, told CNBC that the government's rapid U-turn on migration policy had upset Swedes who had welcomed refugees a decade ago, and had left many migrants in limbo.

"After 2015, there was a huge civil society mobilization around helping out and receiving all these people. Then a lot of them felt super betrayed later when, all of a sudden, the policies changed," Lind said.

"Before November 2015, people were told 'open your hearts,' 'we don't build walls,' that we should all help out and everyone should step in, and people did it. And then they [the government] shifted position. Now, to stop immigration what they do is make it harder not just to get here, but also [make life harder] when you're in Sweden. So the situation for those who were let in, and that people did help, became very rapidly, very difficult."

Lind accused the government of scapegoating migrants, "saying they're ... basically the cause of all problems, which of course is not true."

"Even if there are challenges and costs associated with helping people, and getting people to integrate, we know it takes time. But they are really weaponizing the problems and saying that every problem in Sweden right now is because of integration and migration," he said.

The dramatic shift in social attitudes toward immigration is not exclusive to Sweden, enveloping the rest of Europe as well.

A decade ago, all member states of the European Union were encouraged to welcome asylum seekers and refugees fleeing conflict zones in the Middle East, notably Syria but also Iraq and Afghanistan.

By the end of 2016, nearly 5.2 million refugees and migrants had reached Europe, according to the UN Refugee Agency, with Germany alone welcoming over a million refugees.

The vast numbers saw anti-immigration sentiment rise across the continent, prompting a surge in support for right-wing parties calling for strict immigration limits.

Sweden's government says its restrictive policies are working. In August, Sweden's justice ministry announced that it now "has more emigrants than immigrants for the first time in half a century," with an ongoing trend of fewer asylum seekers and residence permits being granted.

"Sweden is on track to have the lowest number of asylum seekers since 1997 and, for the first time in over 50 years, Sweden has net emigration," the ministry said in a statement, citing information from the Swedish Migration Agency.

Net migration or emigration is the difference between immigration to and emigration from a certain area over one year. Positive net emigration means more people are leaving a country than moving to it.

"While the number of asylum seekers in the EU has stabilised at a high level, it continues to decline in Sweden," Sweden's justice ministry noted, saying that there had been a 27% drop in asylum applications in the period up to July 28 this year, compared to the same period last year.

This year, Sweden is expected to have its lowest number of asylum seekers since 1997.  "This development towards sustainable immigration is necessary to strengthen integration and reduce social exclusion,” Minister for Migration Maria Malmer Stenergard said in a statement.

Morten Lund, chief Scandinavia economist at J.P. Morgan, said Sweden's new immigration rules could have an impact the economy in a number of ways but that "the magnitude is not clear."

"All else equal, growth would be lower — both via less gains in total hours worked, and probably also via productivity as it may lead to labour shortages in certain industries," he said in emailed comments.

Restrictive migration policies were likely to be slightly inflationary, Lund added, although he caveated his position by stating that "the impact on inflation is modest and highly uncertain."

"Labour shortages could lead to higher cost-push inflation, but on the other hand, less immigration leads to less consumer demand (and hence lower demand-push inflation). One interesting area is the housing market. Lower immigration will reduce the need for new housing, thereby dampening the structural imbalance of housing under-supply, and hence [could] lead to less increases in house prices," Lund said.